Stocks and Bonds Plunge as Investors Fear Harris Presidency and Tax Hikes

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Tax Hikes,Stocks,Bonds

The recent surge in core inflation coupled with sharp declines in equities and bonds suggests a deeper concern than just the slight rise in consumer prices. Investors fear a potential Harris presidency and its proposed tax increases, which could significantly impact corporate earnings and economic growth.

on the unexpected increase in core inflation, the severity of the moves in equities and bonds indicates something more is at work than a one-tenth of a point move in the index of consumer prices excluding food and energy.toxic for stocks because it is centered around tax increasesDonald Trump’s 2018 Tax Cuts and Jobs Act

Goldman’s analysts estimate that each one percentage point change in the statutory domestic tax rate would shift S&P 500 earnings per share by slightly less than one percent. So,, according to Goldman. Combined with other Harris proposed changes to the corporate tax code, earnings would likely fall by eight percent. That obviously has big implications for stock prices, which are based on multiples of future earnings.

. Despite all the carping about tariffs pushing up prices, recent history demonstrates that Trump’s policies did not result in inflation. Indeed, the Fed started cutting interest rates even before the pandemic arrived once it became clear that there were no inflationary effects from the China and metals tariffs. Instead, we got inflation under the Biden-Harris policies that Harris is very likely to double-down on if elected to the main office in the White House.

Billionaires alone own more than $5 trillion in stock, or 7% of the entire stock market. Public stock represents 66% of their wealth, so they would need to sell hundreds of billions of dollars worth of stock to fund their wealth-tax payments. These sales would drive down stock prices and, therefore, returns for all investors. The largest, most innovative and fastest-growing U.S. tech companies would be hit the hardest. Unrealized capital gains are concentrated in these companies.

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